(a) Figures in brackets show the number of meetings each member was eligible to attend.
(b) Mr Macfarlane's term as Governor ended on 17 September 2006.
(c) Mr Stevens was appointed Governor on 18 September 2006.
(d) Mr McLean was appointed to the Board on 29 November 2006.

Table 2: Australian Non-cash Retail Payments

Year to June 2007

Growth, year to June 2007

Per cent of total

Per cent

Number

Value

Average value ($)

Number

Value

Cheques

8.6

14.1

4,039

−7.7

4.0

Direct debits

10.6

34.8

8,062

6.2

14.0

Direct credits

23.5

47.8

4,963

9.8

14.7

Debit cards

27.7

0.8

68

9.4

9.6

Credit cards

25.7

1.5

138

5.4

9.4

BPAY

3.9

1.1

671

15.6

19.4

Total

100.0

100.0

2,446

6.6

12.7

Sources: BPAY; RBA

Table 3: Credit and Debit Card Accounts

Growth, per cent, year to:

June 2007

June 2007

June 2006

June 2005

Number of accounts

Credit (million)*

13.5

4.4

8.1

6.5

Debit (million)

27.0

4.3

2.9

1.6

Advances outstanding*

Total ($ billion)

40.8

11.4

16.7

13.1

Accruing interest ($ billion)

29.1

10.1

18.6

13.2

Average total outstanding per account ($)

3,014

4.4

8.1

6.5

* Includes credit and charge card accounts

Source: RBA

Table 4: Non-cash Retail Payments in Selected Countries

Number per capita, 2005

Cheques

Directdebits

Directcredits

Debitcards

Creditcards

Total

United States

112

25

19

75

70

299

Canada

42

19

27

95

60

243

United Kingdom

32

45

50

70

35

232

France

63

40

38

84*

na

225

Netherlands

0

63

75

82

5

224

Australia

24

24

59**

59

58

224

Sweden

na

18

57

97

20

192

Germany

1

81

81

24

5

192

Switzerland

0

7

82

37

14

140

Singapore

20

12

6

32

na

69

* Split between debit and credit cards not available ** Includes BPAY transactions

Sources: Bank for International Settlements (BIS); RBA

Table 5: Fraud on Locally-issued Cards, 2006

Cents per $1,000 transacted

Category

Australia

United Kingdom

Lost/stolen

4.6

12.6

never received

1.4

2.8

Fraudulent application

1.2

2.2

Counterfeit/skimming

7.8

18.4

Card not present

6.6

39.2

Other

2.2

3.7

Total

23.9

79.0

Sources: APCA; APACS

Table 6: Credit Card Interchange Fees

Exclusive of GST

MasterCard

Visa

1 Nov2006

26 Jun2007

1 Nov2006

30 Jun2007

Consumer standard

0.30%

0.43%

0.55%

0.55%

Consumer electronic

0.46%

0.43%

0.40%

0.40%

Consumer chip

–

0.63%

0.50%

0.50%

Commercial

1.12%

1.15%

1.15%

1.15%

Commercial chip

–

1.35%

–

–

Premium

0.90%

0.95%

0.90%

0.90%

Premium chip

–

1.15%

1.00%

1.00%

VMAP*

–

–

–

0.30%

Tiered merchants

–

0.34%

–

–

Petroleum

–

0.34%

–

–

Government and utility

– electronic

–

0.30%

30.0¢

30.0¢

– standard

–

0.30%

74.0¢

74.0¢

Micropayment

–

–

2.5¢

2.5¢

Charity

–

0%

0%

0%

Recurring payments

–

0.30%

0.40%

0.40%

Quick/express payments

–

0.30%

0.40%

0.40%

Benchmark

0.50%

0.50%

0.50%

0.50%

* Visa Merchant Alliance Program

Sources: MasterCard website; RBA; Visa website

Table 7: Scheme Debit Card Interchange Fees

Exclusive of GST

MasterCard

Visa

1 Nov 2006

26 Jun 2007

1 Nov 2006

Consumer standard

–

36.4¢

0.31%

Consumer electronic

–

9.1¢

8.0¢

Consumer chip

–

13.6¢

–

Commercial

–

36.4¢

–

Commercial chip

–

40.9¢

–

Tiered merchants

–

3.6¢

–

Petroleum

–

9.1¢

–

Government and utility

– electronic

–

29.1¢

8.0¢

– standard

–

29.1¢

37.0¢

Micropayment

–

0.50%

2.5¢

Charity

–

0%

0%

Electronic incentive

–

–

4.0¢

Recurring payments

–

9.1¢

8.0¢

Quick/express payments

–

0.50%

8.0¢

Benchmark

12.0¢

12.0¢

12.0¢

Sources: MasterCard website; RBA; Visa website

Table 8: Credit Card Rewards Programs

Four largest banks, June 2007

Average spendingrequired for$100 voucher

Benefit tocardholder as a proportion ofspending (%)

2003

12,400

0.81

2004

14,400

0.69

2005

15,100

0.66

2006

16,000

0.63

2007

16,300

0.61

Sources: Banks' websites, Cannex

Table 9: Core Principles and Central Bank Responsibilities

for Systemically Important Payment Systems

Core Principles for systemically important payment systems

I.

The system should have a well-founded legal basis under all relevant jurisdictions.

II.

The system's rules and procedures should enable participants to have a clear
understanding of the system's impact on each of the financial risks
they incur through participation in it.

III.

The system should have clearly defined procedures for the management of credit risks
and liquidity risks, which specify the respective responsibilities of the
system operator and the participants and which provide appropriate incentives
to manage and contain those risks.

IV.

The system should provide prompt final settlement on the day of value, preferably
during the day and at a minimum at the end of the day.

V.

A system in which multilateral netting takes place should, at a minimum, be capable
of ensuring the timely completion of daily settlements in the event of an
inability to settle by the participant with the largest single settlement
obligation.

VI.

Assets used for settlement should preferably be a claim on the central bank; where
other assets are used, they should carry little or no credit risk and little
or no liquidity risk.

VII.

The system should ensure a high degree of security and operational reliability and
should have contingency arrangements for timely completion of daily processing.

VIII.

The system should provide a means of making payment, which is practical for its users
and efficient for the economy.

IX.

The system should have objective and publicly disclosed criteria for participation,
which permit fair and open access.

X.

The system's governance arrangements should be effective, accountable and transparent.

Responsibilities of the central bank in applying the Core Principles

A.

The central bank should define clearly its payment system objectives and should disclose
publicly its role and major policies with respect to systemically important
payment systems.

B.

The central bank should ensure that the systems it operates comply with the Core
Principles.

C.

The central bank should oversee observance with the Core Principles by systems it
does not operate and it should have the ability to carry out this oversight.

D.

The central bank, in promoting payment system safety and efficiency through the Core
Principles, should cooperate with other central banks and with any other
relevant domestic or foreign authorities.

Recommendation: Require entities located outside
the Australian jurisdiction that apply for participation in RITS either
as a branch or on a remote basis to provide a legal opinion that analyses
possible conflict of laws and potential legal risk for RITS and its participants.

Response: At this stage the RBA is not convinced
that the potential legal risks arising from the participation in RITS of
entities not located in Australia warrant the additional cost to new participants
of gaining further legal certainty.

Security and operational reliability, and contingency arrangements

Recommendation: Require security enhancement of
the proprietary communication network to meet international standards with
regard to confidentiality, integrity and authenticity of the transmitted
information and data. Consider an external review of the RBA's business
continuity plan that would include the assessment of the hardware, software
and internal procedures.

Response: Implementation of a new RITS user interface
was completed in April 2007, bringing the confidentiality, integrity and
authenticity of transmitted data up to best practice. This project was well
advanced at the time of the FSAP assessment. The RBA is considering the
commissioning of an external review of RITS architecture in 2007/08, including
business continuity arrangements.

Efficiency and practicality of the system

Recommendation: Consider following up its studies
of RITS costs and pricing structure by consulting RITS users. The RBA should
consider a review of the pricing structure to ensure that it promotes efficient
functioning of the system.

Response: The RBA's Business Services Group
has undertaken considerable work on pricing of RITS transactions and various
means of balancing requirements for cost recovery, system efficiency and
the provision of appropriate incentives for participants. Liaison with industry
will occur in due course.

Governance of the payment system

Recommendation: Consider establishing a consultative
framework with the users in order to ensure RITS continues to meet users’
needs in terms of efficiency, practicality and service level. The RBA may
wish to re-establish its advisory user groups, representing different categories
of RITS participants, to discuss issues related to technical and business
features of RITS.

Response: The RBA now holds RITS User Group Forums
in Sydney and Melbourne twice each year. The first forums were held in February
2007.

Central bank responsibilities in applying the Core Principles

Recommendation: Consider whether current arrangements
avoid potential conflicts of interest between the policy and oversight functions
(that fall under the jurisdiction of the PSB) and the RBA's role as
an operator of the RITS system. Strengthen the implementation of the PSB's
oversight responsibility by developing formal methods and procedures including
regular monitoring and reporting, on-site inspections of important payment
systems and arranging regular meetings with payment system providers and
other stakeholders.

Response: Internal RBA discussion offers considerable
benefits and the Board is satisfied that procedures are in place to identify
and address any conflicts of interest that might arise.